09 June 2021

Shell’s Climate Obligation

Climate, Civil Courts, Human Rights, and Balance of Powers

The 1.5-degree limit in Article 2 of the Paris Agreement requires near-zero emissions very soon. That implies zero fossil fuels in all sectors including electricity, building, mobility, agriculture, plastics, and cement – and greatly reduced livestock (supplemented by some non-hazardous negative emissions measures like forest and peatland management). However, the political majorities around the globe are not regulating in that direction. Instead, climate lawsuits are making headlines. For example, the German Federal Constitutional Court has ordered German lawmakers to specify climate targets and better balance freedom opportunities between generations. In Australia, a Melbourne court  put forward similar arguments in a lawsuit over a coal mine.

On 26 May, the District Court of The Hague ruled that the fossil fuels company Royal Dutch Shell needs to reduce its emissions by 45 percent by 2030, compared to 2019. Precisely, the court held Shell responsible for its entire production and supply chain. In short, the Dutch court adjudicates the following in its verdict: There is a need for global zero emissions by 2050. To this end, different paths are conceivable. At the same time, any company, no matter its size, has to deliver a minimum reduction by 2030 – beyond any democratic balancing on distributive questions.

The ruling will greatly advance the implementation of Article 2 of the Paris Agreement and climate-related human rights and cause turmoil in business, politics and society, and thus most likely promote ambitious climate protection. However, several points of the verdict require further legal discussion:

1) The verdict is first-instance. It can thus be modified or revoked in further instances. Since the court more or less deviates from everything that civil courts usually do, it remains an open question what is going to happen.

2) The District Court of The Hague understands what the German Federal Constitutional Court has already clarified: There is a fundamental right to climate protection. I personally feel very pleased with the court’s finding that there is a “widespread international consensus that human rights offer protection against the impacts of dangerous climate change” as I have utilized this argument for 20 years. However, such insights are probably not that “widespread” as I have been laughed at for this argument for 20 years in legal and political debates. This even more so applies to the Court’s finding that there is “widespread consensus … that companies must respect human rights.” In fact, the argumentation of the Dutch court builds on the very vague concept of due diligence and in parts draws legally binding conclusions from standards that are actually non-binding. All of this also contributes to a lack of clarity. Here, more convincing argumentation approaches could be developed.

3) The German Federal Constitutional Court understood very clearly: Climate is about freedom rights as a whole. Both climate change and hasty climate protection can undermine our freedom. The Federal Constitutional Court also understood that fundamental freedoms and elementary preconditions of freedom create a trade-off that can be resolved in very different ways. This is the task of parliaments; constitutional courts merely monitor whether balancing limits are complied with the process (which in turn derive from these rights to freedom and its preconditions). “Human rights” do not demand anything “per se,” but rather provide a balancing sphere; only the limits of this balancing sphere formulate unconditional limits for the parliamentarian majorities. According to our lawsuit (insofar adapted by the German court), the 1.5 degree limit of the Paris Agreement roughly provides such a balancing limit. However, according to the German ruling, it is left to the democratic balancing procedure who has to reduce emissions and when and how this needs to be done. This includes not only balancing the various normative concerns such as various aspects of freedom, but also the natural scientific and economic factual issues, which are characterized by uncertainties. Here, the Dutch District court wants to go further. It not only assumes a role similar to that of a constitutional court in determining the limits of the democratic process. It also delves deeply into distributional issues by specifying what an individual actor exactly has to do to protect the climate. However, if civil courts are left to determine the balancing between private persons (including companies), the fear that this could render the democratic balancing process obsolete is not entirely absurd. Here, the Dutch court is trying to solve this issue by requiring only a minimum standard of emission reductions from Shell and by accepting that emissions trading makes emission reduction obligations tradable throughout Europe – covering already a significant amount of Shell’s emissions. This is a plausible approach and limits the problem, but does not eliminate it entirely. In any case, completely splitting a global problem into civil law relations between single persons would hardly be conceivable. Instead, the court could have established a greater reference to the state-like role of large corporations – and to the fact that in large parts of the world there is only limited state administration capable of acting. The latter aspect could work in favor of stronger obligations of transnational corporations.

4) Even if a reduction obligation of companies is considered justifiable under civil law, open questions remain. This includes the exact calculation of the minimum standard in question, especially if the entire production and supply chain is included and what this would mean in detail. Besides, further clarification is required on the effect of the potential integration of (almost) all fossil fuels into the EU Emissions Trading Scheme in the near future. This could remove more emissions from the individual disposal of the companies. At last, open questions remain on how to deal with the problem that in international climate law emissions are actually counted territorially by state – rather than beyond borders, as the court suggested for Shell.

5) The District Court of The Hague, like the German Federal Constitutional Court, applies the budget approach for greenhouse gas emissions of the Intergovernmental Panel on Climate Change (IPCC). The weaknesses of the IPCC budget, which – as a result of being a consensus body – works with optimistic assumptions (for example on climate sensitivity), are ignored by the court. Likewise, legal criticisms of the IPCC budget, which is after all intended as a concretization of a legal norm, namely Article 2 of the Paris Agreement, are passed over by both courts. Precisely, if Article 2 is legally binding, it is not sufficient to aim for the 1.5 degrees with only a 67 percent probability, as the IPCC does. Furthermore, Article 2 of the Paris Agreement refers to the comparison to pre-industrial levels. Here, the IPCC applies a year in the second half of the 19th century as the base year. This is highly problematic because the industrialization began as early as approximately 1750.

6) The Dutch ruling contains some more problematic legal assessments. For example, the Paris target (unlike in the verdict of the German Federal Constitutional Court) is classified as legally non-binding – without justification. Furthermore, also unlike the German ruling, the door is left wide open for risky negative emission approaches of all kinds, such as geoengineering. If a company like Shell were to try to fulfill its climate protection obligations by adopting risky negative emission approaches, this could encroach human rights again.

7) In spite of these weaknesses, the ruling will in fact greatly advance the implementation of Article 2 of the Paris Agreement and climate-related human rights. This is because, regardless of how convincing the legal argumentation of the District Court is, the verdict will cause great turmoil in business, politics and society and thus most likely promote ambitious climate protection. Moreover, the lawsuit will be followed by more and better claims to other civil courts all over the world. It will also discourage investments in fossil fuels globally. Apart from that, such verdicts enable the implementation of overarching policy instruments more likely, which could ultimately be at the heart of solving the climate problem. For example, it would be very useful to integrate all fossil fuels into the EU emissions trading, combined with a cancellation of all old certificates and a cap zero by 2035 at the latest (scientifically more likely even 2030). In fact, the EU Commission will soon present proposals which point in that direction.

At last, the finding of the District Court of The Hague that it is in fact possible to hold companies accountable for their customers is very apt. After all, companies will try to pass any costs on to the customers anyway. More generally, from a sociological perspective, social change occurs in an interplay of actors.

Besides, it is to be welcomed that the District Court of The Hague argues in a truly international way. By contrast, the German Federal Constitutional Court remains in many respects quite Germany-oriented, despite a few citations of foreign courts’ rulings and referring to an overall obligation to global climate protection. For example, the German ruling quotes almost exclusively German texts from the legal literature – and thus follows a rather strange tradition of German jurisprudence.

SUGGESTED CITATION  Ekardt, Felix: Shell’s Climate Obligation: Climate, Civil Courts, Human Rights, and Balance of Powers, VerfBlog, 2021/6/09, https://verfassungsblog.de/shells-climate-obligation/, DOI: 10.17176/20210610-004138-0.

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